Powergen price rises to lift average bill by £95 a year

Millions of households are facing higher fuel bills after Powergen, the gas and electricity supplier, warned it was raising prices from the end of next month.

It said gas prices would go up by 11.9% and electricity prices by 7.2%.

"The UK is in an era of rising energy prices and we, like all energy suppliers, are under tremendous pressure as the prices we pay for electricity and gas reach all-time highs," said Nick Horler, managing director of Powergen Retail.

Other companies are likely to follow Powergen's lead. Last month, Centrica warned that double-digit rises were in the pipeline at its British Gas subsidiary.

Powergen said it was being forced to raise prices because wholesale electricity prices had risen by almost a quarter since last November while gas prices were more than a third higher.

Energywatch, the gas and electricity watchdog, expressed concern that a new round of increases was on the way. "They are saying this is about wholesale price rises. But the thing that concerns us is that across the industry we see companies pass the risk of those price rises on to customers."

Powergen also said it was setting aside £18m to fund measures to help its most vulnerable customers, including free cavity wall and loft insulation. It said it was offering all customers discounted cavity wall insulation which it said could save households up to £160 a year. Electricity users would get four free low-energy light bulbs.

Mr Horler said that he had decided to increase prices during the summer at a time when energy usage was lower. "By making a smaller increase in the summer rather than a larger increase later this year we can help our customers ahead of the winter when they use energy most. Together we can do this by making their homes more energy efficient and by offering specific support to vulnerable households."

TheEnergyShop.com, an energy price comparison website, said it expected the average household energy bill to rise by between £80 and £95 a year before the end of 2005. That would mean bills would have increased by £200 a year since January 2003.

"We have been warning for some time now that substantial price increases were on their way and today's announcement means they are coming sooner rather than later," its chief executive, Joe Malinowski, said.